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Economy.The economic paces that we are dealing with today means lower interest rates for a longer time. Most equities right now are discounting a 3%-3.5% 10 year bond yield, which makes a lot of companies compelling value at these levels. Expects the Fed might push back their tapering to Q4 and possibly to Q1 if we keep getting weak job numbers like we did today.

US Mortgage REITs. Dividends are not safe. As interest rates rise, hopefully the spread that they can invest in grows and the cash flow hopefully grows. The offsetting impact is that as interest rates rise, the BV of the offsetting assets that they own collapses. That is what has happened with a number of these mortgage REITs. He sold his holdings.

Relationship between the yield of 10 year Canadian government bonds and current REIT prices?Relationship between REITs and 10 year bond yields is inverse. As the 10 year bond yield goes up, REIT prices generally come down. He thinks the sector as a whole is pricing in 3% 10 year bond yield. The fact that we are at 2.4%-2.5% means that the sector has probably overcorrected.

Growth in this company is going to slow a little. A lot of their growth has been through acquiring facilities, developing facilities and acquiring larger stakes in facilities they already own. This is going to slow down a little but they will continue to grow. Good management. Trading at or just below NAV. Dividend is safe and you can expect modest growth going forward. If you are willing to accept a little volatility than you could step into this. 4.9% dividend yield is safe.

The question is, where is BV going to trough and can you buy it at a discount to BV. Right now the BV is around $25.50 so if you can buy it at a discount to that price, you should do pretty well. As the 10 year bond continues to back up, the BV is going to continue to come under pressure and it is a question as to whether they can maintain the dividend. He would wait to see who the next fed governor in the US is going to be.

A global tower company. Has owned for quite some time and is very happy with it. A little disappointed on their global side. Unhedged and the US$ has strengthened while foreign currencies have weakened. However, a strong US$ is probably good for them right now as they are investing outside of the US and into these countries and able to buy assets at a discount. Stock has dropped because a report came out that undermined several of the founding tenants of this company. Most of the report was factually incorrect and blatantly inflammatory. You are getting a great return if you can buy in the low $70s. 1.5% dividend yield is going to grow at about 10%-12% a year.

A diversified power name, gas, heating oil, coal. The problem with this company is that the average duration of their purchase agreements are sub-10 years and he likes to see greater than 10 years. Leverage is high and the payout is high. They cut the distribution earlier this year. Have a number of plants that are going to be re-contracted later this year and if some of these are recontracting at considerably lower levels, there could be another distribution cut.

A diversified REIT. Entered into the US. A couple of headwinds have impacted this company. Moved a material amount of their balance sheet into variable rate debt so as the 10 year backed up on both sides of the border, people have expressed concern about what that means for their cost of capital. Have also been very, very acquisitive so they issued a lot of equity in the last couple of years. Probably worth $18-$19. 7.5% yield.

Global utility/infrastructure name. Have assets in North America, South America, Europe and Asia. Also, into rail, storage and an Australian terminal. He sees them taking assets out of low single digit ROE investments and putting them into mid-teen ROE assets. Has delivered a 20% compound annual return over the last 5 years and grown its distribution by over 7% a year for the last 3 years. 4.67% yield.

Very good name. Multi-residential. Some of the issues that have crept up recently is diversification initiatives that management has implemented. Bought some US assets and entered into long-term management agreements and there is speculation that they bought some assets in Ireland. All in all, the portfolio is rock solid. Have made tremendous progress in the last 5 years by bringing the payout ratio down and improving the quality of the assets and diversifying the portfolio. Probably worth $26-$27.

Brand new IPO that was spun out of Loblaw’s to hold the majority of their real estate. Better quality real estate than he anticipated, the payout ratio was excellent and the leverage was very low. Experienced management which he likes. Didn’t like some of the aspects of the strategic alliance agreement between Loblaw’s and this company. It limited some of their ability to create value and growth one forward. Also, in a rising interest rate environment, they are only going to generate 1.5% growth 5 years out from now.

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